GENEVA -- SWIFT’s Global Payment Innovation (GPI) initiative aims to streamline cross-border payments, but how will it help multinational corporations and their treasury functions? Panelists discussed that topic Monday at Sibos 2016.
Moderator Stanley Wachs, head of bank engagement, GPI initiative for SWIFT, noted that for many banks 80 to 90 percent of transactional revenue at risk from competition is in the B2B space. “So the initial focus of the [GPI] initiative and the pilot that we ran this year is on the corporate segment,” he said. “So you may ask, ‘What’s in it for the end customer?’”
Wachs listed the several key features of the initiative:
- Same-day availability of funds
- A transparent and predictable fee structure
- End-to-end payments tracking
- Enhanced remittance information, transferred unaltered.
“These bring significant value in terms of helping corporates grow their international business and better manage their supplier relationships and their treasury efficiencies,” he said.
Panelist Magnus Carlsson, AFP’s manager of treasury and payments, said that one cross-border payment challenge corporates hope GPI will address is the time delay. “When you send a payment and you believe it’s going to arrive at a certain time, that’s very important,” he said. “But quite often, for whatever reason, the payment is delayed. It could be a purpose code that’s missing, it could be anti-money laundering regulations in different countries causing a delay.”
Carlsson added that if a recipient doesn’t receive a payment on time it can cause other issues, particularly for treasury. “In the treasury department, you work with cash forecasting, capital management, etc.,” he said. “When a payment doesn’t show up on time that can create liquidity issues for you.”
The tracking feature of the GPI should help immensely in this regard, Carlsson noted. “It’s very important that if you expect a time delay on that payment, you can communicate this to your business partner,” he said. “They can also see why it’s held up, and there’s not a conflict there. If you know in advance, you can adjust your models for cash forecasting and whatnot.”
It’s important to note that corporates aren’t necessarily demanding payments be made in real time, or even same-day. They simply want to know that when a payment is set to be delivered, that actually happens at that time. John Hunter, managing director, USD Clearing, treasury services for J.P. Morgan, noted that even though much of the dialogue these days is around real-time payments, when he talks to corporate clients, they aren’t always asking for payments to be faster. “What they need is some predictability around when it’s going to be there,” he said. “It doesn’t have to be in 14 seconds; it’s okay if it takes seven hours. They just need to know that it’s going to be credited on this business day so that they can set that expectation with their client.”
The GPI’s same-day availability of funds feature enables banks to provide that transparency to the remitter, Hunter added. “So we can say to our clients, ‘As long as we get your payment by x, it will be credited today and if not then it’s going to be credited tomorrow.’ And they’re fine with that; they just want to know up front when it’s going to get there.”
Corporates also face an issue of payments showing up in recipient’s accounts that are lower than what was sent, Carlsson added. “Even if your bank has been very transparent about fees, it could happen that the recipient’s bank adds another fee that you and your bank don’t know about, causing the final amount received to be lower,” he said. “So the amount is not the amount that was agreed upon and so, worst case scenario, you’ll have to send another transaction, with extra fees and everything.”Carlsson has spoken with treasury executives from several large multinationals who wanted to know if a large investment is needed to join the GPI. “What is the final pricing for this,” he asked. “Is it going to be more expensive than the original wires? Does it mean that we need to make any internal adjustments to our infrastructure? It costs money to do that, so if this cost is too high as compared to the way we’ve been running things, maybe there’s not a Is there a business case,” he said.